Supreme Court Clarifies Notice of Award Under Arbitration Act: Krishna Devi vs. Union of India (2025) INSC 24

Introduction

Date of the Judgment: January 3, 2025

Citation: 2025 INSC 24

Judges: Pamidighantam Sri Narasimha, J. and Sandeep Mehta, J.

When does the clock start ticking for challenging an arbitration award? Is it when a formal notice is received, or when a party becomes aware of the award? The Supreme Court of India recently addressed this crucial question in a case concerning the Arbitration Act, 1940. The Court clarified that the limitation period for challenging an award begins when a party has knowledge of the award, not necessarily from the date of formal notice. This judgment emphasizes the importance of awareness over strict procedural formalities in arbitration matters. The judgment was authored by Justice Pamidighantam Sri Narasimha, with Justice Sandeep Mehta concurring.

Case Background

The case involves a dispute arising from a work order secured by M/S S.R. Engineering Construction in 1987-1988 for constructing an ‘armament section’ at Tezpur. The firm completed the work and raised a bill on January 18, 1993. However, the respondents failed to make the payment, leading the firm to seek arbitration. After initial setbacks, an arbitrator was appointed on August 26, 2019. The appellant’s husband, the sole proprietor of the firm, passed away during the arbitration, and she continued as his legal heir.

The arbitrator issued an award on May 31, 2022, in favor of the appellant, directing the respondents to pay Rs. 1,33,47,268.92 with 9% interest. However, the award could not be published as the respondents had not cleared their share of the arbitrator’s fees. The appellant then filed an application under Section 38 of the Arbitration Act, 1940, seeking a direction to the respondents to clear the dues.

On September 21, 2022, the District Judge, Sonitpur, ordered the respondents to clear the dues of Rs. 47,212.33, stating that a copy of the award would be provided upon payment. The appellant received the award copy on September 22, 2022. The respondents deposited the balance payment only on November 18, 2022, and received formal notice of the award on the same date.

On November 10, 2022, the appellant filed an application under Section 17 of the Arbitration Act, 1940, seeking pronouncement of judgment according to the arbitral award.

Timeline

Course of Proceedings

The District Court dismissed the appellant’s application under Section 17, deeming it premature because it was filed before the expiry of the 30-day limitation period for filing objections to the award. The court reckoned the limitation period from November 18, 2022, when the respondents received formal notice of the award.

The appellant challenged this order in the High Court, which also dismissed the revision petition, upholding the District Court’s view that the limitation period commenced from the date of formal notice (November 18, 2022). The High Court relied on Sections 14 and 17 of the Arbitration Act, 1940, and Article 119 of the Limitation Act, 1963, to conclude that only a formal notice issued by a court satisfies the requirement of Section 14(2) of the Arbitration Act, 1940.

Legal Framework

The case revolves around the interpretation of Section 14(2) of the Arbitration Act, 1940, and Article 119(b) of the Limitation Act, 1963.

Article 119(b) of the Limitation Act, 1963, specifies a 30-day limitation period for setting aside an award or getting it remitted for reconsideration. The period begins from “the date of service of the notice of the filing of the award“.

Section 14 of the Arbitration Act, 1940, states:

(1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.

(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been, taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award.

Section 17 of the Arbitration Act, 1940, deals with judgment in terms of the award:

Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award.

Arguments

Appellant’s Arguments:

• The appellant argued that the date of the District Judge’s order on September 21, 2022, directing the respondents to pay the arbitrator’s fees, should be considered as the date of ‘notice of filing the award.’ This is because the order stated that upon payment of the dues, a copy of the award would be furnished to both parties.
• The limitation period of 30 days for filing objections, as per Article 119(b) of the Limitation Act, 1963, began on September 21, 2022, and expired on October 20, 2022. The application under Section 17 was filed on November 10, 2022, after the expiry of the limitation period.
• The respondents never claimed they did not receive ‘notice of the award,’ but only that they did not receive a ‘copy of the award.’
• The essential requirement of Section 14(2) of the Arbitration Act, 1940, is that the award-debtor has information that the award has been filed. Formal notice is not mandatory.
• Reliance was placed on Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti, [1961 SCC OnLine SC 75], where the Supreme Court held that communication of information need not be a formal notice.
• Reliance was also placed on Deo Narain Choudhury v. Shree Narain Choudhury, [(2000) 8 SCC 626], which stated that communication may be oral and not necessarily in writing.
• Further reliance was placed on Ch. Ramalinga Reddy v. Superintending Engineer, [(1999) 9 SCC 610], which noted that while Section 14(1) required written notice, Section 14(2) did not.

Respondents’ Arguments:

• The respondents argued that the limitation period started on November 18, 2022, when they received formal notice of the award from the District Court.
• Section 14(2) of the Arbitration Act, 1940, requires a formal notice of the award, and the mere direction to pay the arbitrator’s fees cannot be considered as a formal notice that the award has been filed.
• The intention of Section 14(2) is to enable the award-debtor to apprise themselves of the award’s contents to file objections effectively.
• The order of September 21, 2022, merely stated that the respondents were required to clear the balance fees, following which the award may be published, indicating that the payment of fees does not satisfy the requirements of Section 14(2).
• If the appellant’s interpretation is allowed, the legal event constituting ‘notice of the filing of award’ will vary from case to case, which is not the intention of Section 14(2).

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the time for filing a Section 17 application commences when the party seeking to challenge the award receives a formal notice of the making of the award, or from the date such party is aware of the existence of the award.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

✓ The Court relied on Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti, [1961 SCC OnLine SC 75], to emphasize that communication of information about the award need not be a formal notice.

✓ The Court cited Deo Narain Choudhury v. Shree Narain Choudhury, [(2000) 8 SCC 626], to support the view that communication of the award may be oral and not necessarily in writing.

✓ The Court referred to Ch. Ramalinga Reddy v. Superintending Engineer, [(1999) 9 SCC 610], to highlight that while Section 14(1) requires written notice, Section 14(2) does not.

✓ The Court cited Food Corporation of India v. E. Kuttappan, [(1993) 3 SCC 445], to support the view that communication of the filing of an award to the parties’ pleaders was sufficient notice for Section 14(2).

✓ The Court used Indian Rayon Corporation Ltd. v. Raunaq and Co. (P) Ltd., [(1988) 4 SCC 31], to clarify that the objective of Section 14(2) is to ensure that parties are aware of the award’s existence, which is substantive compliance.

✓ The Court referred to Bharat Coking Coal Ltd. v C.K. Ahuja, [1995 Supp (1) SCC 744], to emphasize that the requirement of Section 14(2) is that parties become aware of the filing of the award, not the date of receiving a copy of the award.

✓ The Court interpreted Section 14(2) of the Arbitration Act, 1940, to mean that the parties must be notified of the filing of the award, but the form of notice is not specified.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to uphold the intent of the Arbitration Act, 1940, which is to resolve disputes quickly. The Court emphasized that the purpose of Section 14(2) is to ensure that parties are aware of the existence of the award, not to create procedural hurdles. The Court also noted that a formal notice is not a mandatory requirement for the commencement of the limitation period for filing objections, and that the parties should not be allowed to take advantage of their own inaction by insisting on procedural nuances.

The Court also considered the fact that the respondents were aware of the award’s filing on 21.09.2022, when the District Court directed them to clear the arbitrator’s fees. The Court held that this order was a clear intimation of the award’s filing, and that the respondents should not be allowed to delay the arbitration by insisting on a formal notice.

The Court’s reasoning was also influenced by the need to ensure that the arbitration process is not unduly delayed by procedural technicalities. The Court held that the interpretation of Section 14(2) should be substantive rather than procedural, and that the parties should be expected to take steps to scrutinize the award as soon as they are aware of its accessibility.

The Court rejected the interpretation that a formal notice was required, emphasizing that the intent of Section 14(2) is to ensure that parties are aware of the award’s existence. The Court also rejected the respondents’ argument that the order of September 21, 2022, was not a sufficient notice of the award, stating that the order was a clear intimation of the award’s filing.

The Court’s final decision was based on the interpretation of Section 14(2) of the Arbitration Act, 1940, and the need to ensure that the arbitration process is not unduly delayed by procedural technicalities. The Court’s reasoning was also influenced by the need to ensure that the parties are not allowed to take advantage of their own inaction.

The Court quoted from the judgment:

“…what must be required is that the parties come to know about the existence of the award so that any objections to it may be filed. What appears from the usage of the word ‘notice’ is that the parties merely reach a state of awareness about the award and plan their next steps accordingly, and not the imposition of another procedural step.”

“…the notice is under sub-section (2) need not be a written one.”

“…the only objective of Section 14(2) is that the parties are aware of the award’s existence and suggests that this a substantive compliance.”

Key Takeaways

• The limitation period for challenging an arbitration award begins when a party has knowledge of the award, not necessarily from the date of formal notice.
• The Supreme Court emphasized the importance of awareness over strict procedural formalities in arbitration matters.
• Parties should take steps to scrutinize the award as soon as they are aware of its accessibility.
• The interpretation of Section 14(2) of the Arbitration Act, 1940, should be substantive rather than procedural.
• This judgment reinforces the intent of the Arbitration Act, 1940, which is to resolve disputes quickly.

Directions

The Supreme Court directed the District Judge, Sonitpur, Tezpur, to take up and dispose of the Misc. (J) 61 of 2022 as expeditiously as possible, preferably within a period of five months from the date of receipt of this judgment.

Development of Law

The ratio decidendi of this case is that the limitation period for challenging an arbitration award begins when a party has knowledge of the award, not necessarily from the date of formal notice. This judgment clarifies the interpretation of Section 14(2) of the Arbitration Act, 1940, and reinforces the intent of the Act to resolve disputes quickly. It also establishes that the interpretation of Section 14(2) should be substantive rather than procedural.

Conclusion

The Supreme Court’s judgment in Krishna Devi vs. Union of India clarifies that the limitation period for challenging an arbitration award commences from the date a party is aware of the award’s existence, not necessarily from the date of formal notice. This decision emphasizes the importance of substantive compliance over strict procedural formalities in arbitration matters and reinforces the intent of the Arbitration Act, 1940, to resolve disputes quickly. The Court allowed the appeal and directed the District Judge to dispose of the pending application expeditiously.